10 questions before getting a secured credit card

The Consumer Financial Protection Bureau has taken several enforcement actions against credit card issuers for deceptive marketing practices of add-on products over the past few years, though secured cards, specifically, have yet to be a focal point.

You should gather plenty of information when you apply for a card. In addition, pay attention to such important items as interest rates, fees and the required deposit.

7. Does the issuer report to all three major credit bureaus?

The reason for having a secured card goes far beyond being able to buy things online. It's a vehicle for building a good credit history. If the issuer doesn't report, you've lost a major benefit. (Tip: If you start getting mailers offering you unsecured cards after you've made several months of payments on time, you'll know that the bank is reporting.) Ask if the issuer will flag the report to the credit bureaus as a secured card. Consumer Action points out that such a flag could be a deterrent to rebuilding credit.

8. How long does it take to qualify for an unsecured card?

The card issuer should want to keep you as a customer, so most will qualify you for an unsecured card after a period of making all your payments on time. The average is about a year.

9. Will your deposit earn interest?

Most issuers do not pay interest on a customer’s security deposit, though a few do offer rewards on spending. Also, find out how long the money has to stay on deposit after the account is closed. Some banks will want to keep the deposit for a couple of billing cycles to cover any stray charges that arrive.

10.How can I make the best use of a secured card to build my credit rating?

Buy a few things and pay off the card every month. "People should not get these cards to carry any balance," Sherry says. While secured cards make sure you never spend more money than you can afford, it's not a good idea to keep one any longer than you have to, experts say.

Secured cards have annual fees and higher interest rates than regular, unsecured cards. If you have enough discipline to use a secured card responsibly, you have enough to use an unsecured card and set up a better savings program on your own.

"We recommend to people that it should be a stepping stone," Sherry says.

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